We present a study of the X-ray properties of the nearby face-on Scd spiral galaxy M101 based on recent XMM–Newton observations. In this third and final paper in the present series, we focus on the spatial and spectral properties of the residual emission, after excluding bright X-ray sources with LX > 1037 erg s−1. Within a central region of radius 10 arcmin (21 kpc), the X-ray emission broadly traces the pattern of the spiral arms, establishing a strong link with recent star formation, but it also exhibits a radial scalelength of ≈2.6 arcmin (5.4 kpc) consistent with optical data. We estimate the soft X-ray luminosity within the central 5 arcmin (10.5 kpc) region to be LX ≈ 2.1 × 1039 erg s−1 (0.5–2 keV), the bulk of which appears to originate as diffuse emission. We find a two-temperature thermal model best fits the spectral data with derived temperatures of Graphic keV which are very typical of the diffuse components seen in other normal and starburst galaxies. More detailed investigation of the X-ray morphology reveals a strong correlation with images recorded in the far-ultraviolet through to V band, with the best match being with the U band. We interpret these results in terms of a clumpy thin-disc component which traces the spiral arms of M101 plus an extended lower halo component with large filling factor.